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Talk about speed!

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Wow, that was fast. This pullback has matched last year's December pullback parameters. Much like the year ago pullback that began in first week of December and was sparked by a sell on the news (INTC optimism), this weakness has been fast and furious.

Last year the S&P 500 and DJIA pulled back almost 5% (done), while the NDX pulled back 9.5% (done) and the PHLX Semiconductor Index fell by nearly 15% (done). In addition, over the past few days, many of the Defensive Consumer Staples names have spiked higher. Very similar to last year indeed.

I was on the Cavuto show on FOX yesterday afternoon and CNBC the day before, suggesting that 95% of the rally was behind us. My view has been that the overbought readings on the weekly charts were the key to sustainable gains from last week's highs. Frankly, they suggest most stocks and indices have seen the vast majority of their gains based on their highs last week. To me, that doesn't mean the market is a short...yet. As Toddo has said many times, tops are a process, not an event.

I fully expect that there could be a rally that takes the markets back to last week's highs and could even marginally beat those peaks. It is also important to note the momentum on the weekly technical picture could wane despite the rally back from these pullback levels if it does in fact take place. The bottom line is that many would likely use a rally back to last week's levels as an opportunity to take profits and/or short given the geo-political environment and the upcoming earnings pre-announcement season.

positions in: SMH, SMH puts
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